Question 2 Timoney Ltd manufactures three types of car motor - standard, retro and modern. The budgeted standard costs of each product are detailed below: Direct Materials Direct Labour Variable Overhead Cost Fixed Overhead Cost Standard 5.00 5.00 5.00 7.50 22.50 Retro 7.50 10.00 8.00 15.00 40.50 Modern 10.00 8.00 12.00 12.00 42.00 Sales Price Budgeted volumes (per quarter) 27.00 3,750 48.00 2,250 50.00 1,500 + The following information has also been provided: Direct materials are a specialist mild steel which is priced at 10 per kg. Fixed overhead costs are attributed on the basis of direct labour hours. Production volumes are equal to sales volumes, with no stocks being held. The purchasing manager has advised that due to a problem with the normal supplier, it is likely that the specialist mild steel will be limited to 4,000kg in the incoming quarter. Requirement: a) Calculate the total breakeven point in units for a quarter. b) Using appropriate calculations, advise Timoney Ltd on the optimum production plan detailing the mix of products that should be produced during the quarter in order to maximise profits in the context of the limited supply of specialist mild steel. c) Advise the purchasing manager as to any four ways that may help to overcome the direct labour constraint that exists within Timoney Ltd. d) Explain, using two examples what is meant by a limiting factor. |